Connecting all international aircraft parts markets is the industry future
Despite the rapidly growing passenger flow, growing aviation industry profits and activity indicators in 2011, the forecast for next year is less optimistic. According to the most optimistic IATA expectations the next year airlines’ profits should decrease from the initially planned USD 4.9 billion to USD 3.5 billion. The biggest challenge awaits MRO service providers as airlines will demand exceptionally low priced and increasingly diversified high quality services. Locatory.com maintains that although the Eurozone crisis in aviation will be outweighed by the growing demand for aviation services in the emerging markets, spare parts and components’ providers will still end up losing millions in profits if they refuse to invest in targeting the developing markets and fail in maintaining an international perspective.
In the long term perspective the number of air travellers is expected to continue growing. However, the most pessimistic IATA scenario suggests that in the climate of economic recession airlines should avoid making overly optimistic estimates. According to the IATA, the biggest losses should be expected in Europe (up to USD 600 million) while Africa should prepare to cover losses reaching USD 100 million. Profits in the Middle East will drop to approx. USD 300 million (the previously expected amount was USD 700 million). Latin American carriers will also fail in earning the planned USD 400 million and will have to settle for USD 100 million. In the meantime, the North American airlines will earn USD 1.7 billion and the Asian-Pacific region may expect USD 2.1 billion in profits.
The global MRO market largely consisting of engine and components’ segments is currently valued at USD 50 billion. By 2020 the Asian-Pacific aviation industry will generate 27% (USD 13.5 billion) of the entire global MRO turnover. China alone is expected to bring in USD 3.3 billion. Latin America and the Middle East should generate USD 1.5 and USD 1.4 billion respectively.
To be fair, aviation sector has been experiencing turbulence for several decades now
“To be fair, aviation sector has been experiencing turbulence for several decades now. Although due to the last economic recession the industry lost billions of dollars, most market players were encouraged to offer more diversified service packages. However, in order to survive in this highly competitive market and fierce economic environment, companies must focus on sustaining and developing their relationships with existent and potential clients. This is the only way to ensure customer loyalty and reasonable financial gain,” explained the Locatory.com Chief Commercial Officer Vytautas Vorobjovas.
According to Mr Vorobjovas, there is no such thing as an unambiguous ‘crisis in aviation’. In Europe providers must deal with the Eurozone crisis while in Africa the situation is largely exacerbated by the lack of properly developed infrastructure. In the meantime, the Asian-Pacific region enjoys considerable growth, especially such countries as China, India and Indonesia. This applies to all industry segments, not just the MRO market. Due to rapidly increasing demand for aviation services in the emerging markets the already high demand for aircraft spare parts shall grow even more. However, one of the key areas of business driving aviation industry in general has always been and will continue to be the process of connecting international markets. The aircraft parts and components market is not an exception in this respect either.
“It is highly likely that with the approaching economically challenging times some players will win and some vanish from the aviation map. Those solely resting their strategy on the oldest USA and European markets will certainly face many difficulties. Companies need to remain visible in more than a single region. They must invest in new markets and address different platforms, otherwise they have minor chances to survive and compete with more innovative market players,” said Mr Vorobjovas.